Question

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Down with Dumping

“Canada Launches WTO Challenge to U.S. . . . Mexico Widens Anti-dumping Measure . . . China to Begin Probe of Synthetic Rubber Imports . . . Rough Road Ahead for U.S.-China Trade . . . It Must Be Stopped,” are just a sampling of headlines from around the world.

International trade theories argue that nations should open their doors to trade. Conventional free-trade wisdom says that by trading with others, a country can offer its citizens a greater quantity and selection of goods at cheaper prices than it could in the absence of trade. Nevertheless, truly free trade still does not exist because national governments intervene. Despite the efforts of the World Trade Organization (WTO) and smaller groups of nations, governments still cry foul in the trade game. On average, 234 antidumping cases are initiated each year.

In the past, the world’s richest nations would typically charge a developing nation with dumping. But today, emerging markets, too, are jumping into the fray. China recently launched an inquiry to determine whether synthetic rubber imports (used in auto tires and footwear) from Japan, South Korea, and Russia are being dumped in the country. Mexico expanded coverage of its Automatic Import Advice System.  The system requires importers (from a select list of countries) to notify Mexican officials of the amount and price of a shipment 10 days prior to its expected arrival in Mexico. The 10-day notice gives domestic producers advanced warning of low- priced products so they can report dumping before the products clear customs and enter the marketplace. India set up a new government agency to handle antidumping cases. Even Argentina, Indonesia, South Africa, South Korea, and Thailand are using this recently popular tool of protectionism.

Why is dumping so popular? Oddly enough, the WTO allows it. The WTO has made major inroads on the use of tariffs, slashing them across almost every product category in recent years. But it does not have authority to punish companies, only governments. Thus the WTO cannot make judgments against individual companies that are dumping products in other markets. It can only pass rulings against the government of the country that imposes an antidumping duty. But the WTO allows countries to retaliate against nations whose producers are suspected of dumping when it can be shown that: (1) alleged offenders are significantly hurting domestic producers and (2) the export price is lower than the cost of production or lower than the home market price.

Alternatives to bringing antidumping cases before the WTO do exist. U.S. President George W. Bush relied on a Section 201 or “global safeguard” investigation under U.S. trade law to slap tariffs of up to 30 percent on steel imports. The U.S. steel industry had been suffering under an onslaught of steel imports from Brazil, the European Union, Japan, and South Korea. Yet nations still brought complaints about the action before the WTO. Similarly, in 2004 the U.S. government slapped around 100 percent tariffs on shrimp imported from China and Vietnam, charging those nations with dumping their crustaceans on U.S. shores.

Supporters of antidumping tariffs claim that they prevent dumpers from undercutting the prices charged by producers in a target market, driving them out of business. Another claim in support of antidumping is that it is an excellent way of retaining some protection against the potential dangers of totally free trade. Detractors of antidumping tariffs charge that once such tariffs are imposed they are rarely removed. They also claim that it costs companies and governments a great deal of time and money to file and argue their cases. It is also argued that the fear of being charged with dumping causes international competitors to keep their prices higher in a target market than would otherwise be the case. This would allow domestic companies to charge higher prices and not lose market share— forcing consumers to pay more for their goods.

2. "Identify a recent antidumping case that was brought before the WTO. Locate articles in the press in Chinese or English to help you discuss the case. Identify the nations, product(s), and potential punitive measures involved. If you were on the WTO dispute settlement body, would you vote in favor of the measures taken by the retaliating nation? Why or why not?"  

Answer 1

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The article is available in the WTO official website, The latest one is on December 2019

Nations Involved - Indonesia and Australia

Product involved - A4 copy paper

Case - In 2017 Indonesia requested consultations with Australia in accordance with Article 4 of the DSU Agreement, Article XXII:1 of the GATT 1994, and Article 17 of the Convention on Enforcement of Article VI of the Tariffs and Trade Agreement 1994 (Anti-Dumping Agreement). In this regard, Indonesia requested consultations with the Australian Government in accordance with Article 5(1) In compliance with Article 6 of the DSU, Indonesia demanded the establishment of a standard reference panel. Indonesia argues that ADC is not in line with Article 2.2 of the Agreement on the usual meaning of A4 copy papers rendered by Indah Kiat and Pindo Deli. In the calculation of dumping, the ADC used a build value to assess usual value instead of domestic market revenues. The failure of the ADC to take into account domestic sales was based on the assumption that sales in the A4 copy paper market were not useful in assessing the usual value in Indonesia. Indonesia argues that the decision of the ADC is contrary to Article 2.2 of the Anti-Dumping Treaty, as the circumstances found were not 'special market situation,' as described in Article 2.2 of the Anti-Dumping Agreement. Indonesia also claims that, while an accurate price comparison is possible, ADC behaved inconsistently with Article 2.2 by refusing to take account of domestic markets revenues on this basis. Indonesia has noted that the ADC has not investigated whether domestic sales "permit a fair comparison," and that domestic market sales have been misregarded solely by the assumption that there was a "special market situation." During the ADC inquiry, Paper Australia Pty Ltd argued that there was a peculiar business situation in the Indonesian business, which culminated in the domestic selling of A4 copy paper in Indonesia "not acceptable in accordance with Australian law for deciding normal values." The claimant claimed that in Indonesia the prices of A4 copy paper inputs and subsidies were low artificially because of the Government of Indonesia's control on the raw materials received during the time of investigation. The ADC concluded that in Indonesia, there was a market situation in copy paper copies that sales were not appropriate for use in the Australian legislation to assess normal value.

Conclusion - For the reasons elaborated above, WTO decline to make findings as to whether Australia has acted inconsistently with the chapeau of Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994 by virtue of having calculated and imposed anti-dumping duties in excess of the dumping margin as established under Article 2 of the Anti-Dumping Agreement.

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